Restaurants Reduce Discounting for Quality Traffic
It has been a push-and-pull environment in post-pandemic recovery, restaurant owner-operators trying to navigate the balance between enticing customers into their businesses and making sure that those businesses are profitable in light of inflation and supply chain-related cost increases.
In years past, a very successful marketing tactic has been for restaurants to offer sales and discounts on particular items, drawing in extra traffic and moving more product at a lower price. And while in years past, that may have been a profitable move, with costs on the rise and restaurants having to raise regular menu prices just to remain in the black, discounts for many operators may no longer be effective.
But a shift away from discounting is also indicative in the adjusting consumer mentality. Customers are generally willing to pay more for high-quality foods, thoughtful dishes, and aesthetically-pleasing or earth-friendly experiences. Millennial and Gen Z diners are just as willing to pay a higher price in an establishment that matches these qualifications, and conversely, are less enticed to spend according to a sale price.
This consumer thinking and business advertising is trending across the United States. “‘We’re seeing an attempt to shift away from discounting to offer something more consistent with everyday value for the consumer with a margin construct that makes sense for the restaurant,’ Sara Senatore, a senior research analyst with Bank of America told Nation’s Restaurant News. ‘Several restaurants are reducing the amount of promotional activity and risking a reduction in traffic, because that traffic isn’t necessarily profitable for them.’”
This division of “pre-pandemic and post-pandemic thinking” around discounts—among other things—is consuming the marketing strategies of many major brands, including Bloomin’, Chili’s, and Burger King. While not all are eliminating discounts entirely, they are making adjustments to how and when they discount and how those tactics are communicated to customers.
According to the NRN article linked above, Papa John’s is also experimenting with similar strategies. “Competitor Papa Johns offered a similar take on making sure the company offers value for customers through both reasonable menu prices and a constant pipeline of new menu items for people of different fiscal demographics to try: ‘You have to strike that balance between the ‘absolute price point’ customer, and the ‘value for your money’ customer,’ Papa Johns CEO Rob Lynch said during the first quarter earnings call of 2023. ‘It’s still very hard to go out and find a meal under $15 that can feed a family of four…. We are trying to make sure that we continue to innovate and find ways to deliver on both the value for the money as well as the absolute price point needs as customer price sensitivities increase.’
At National Restaurant Consultants (NRC), we use decades’ worth of menu engineering experience to help restaurants design menus that make sense for both the business and the consumer. Many times, price increases are necessary. Sometimes, discounts may draw in crowds. But sometimes, a menu refresh organized by popular items and price points can shake up the way your customers experience and order from your menu.
“NRC has provided hundreds of restaurant operators this valued processes that often results in 1-3% or more in COGS improvements. While it may seemingly be a tedious task, the outcome and investment has almost immediate returns,” notes Richard Weil Principal and owner of National Restaurant Consultants.
If you are struggling to remain profitable without major price hikes, it might be time to re-engineer your menu—and our restaurant consultants are experts in this area. Get in touch today and simplify your menu experience, for both your customers’ and your business’s benefit.